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Sustainability with endogenous discounting

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  • John M. Hartwick
  • Ngo Van Long

Abstract

We construct a dynamic competitive model with a stock of man-made capital and several stocks of natural resources and ask under what conditions consumption will be constant if in?nitesimal households with heterogeneous preferences and endowments discount their utility ?ows at an endogenous rate that depends some macroeconomic variables. We show that for consumption to be constant, this function must be the marginal product ofcapital function. We demonstrate that Hartwick?s Rule (that along the constant consumption path, resource rents must be invested in man-made capital) holds in a modi?ed form that takes account of natural growth of resource stocks.

Suggested Citation

  • John M. Hartwick & Ngo Van Long, 2017. "Sustainability with endogenous discounting," CIRANO Working Papers 2017s-19, CIRANO.
    • Handle: RePEc:cir:cirwor:2017s-19
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    References listed on IDEAS

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    Cited by:

    1. Daniel Grainger, 2023. "Sustainability criterion implied externality pricing for resource extraction," Papers 2306.04065, arXiv.org.

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    More about this item

    JEL classification:

    • Q01 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General - - - Sustainable Development
    • Q32 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Exhaustible Resources and Economic Development

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